All Ten Selected Pharmaceutical Companies Agree to Join Historic Negotiation Process
On October 3, 2023, the U.S. Department of Health and Human Services (HHS) announced that all ten pharmaceutical companies selected for the first round of Medicare drug price negotiations under the Inflation Reduction Act (IRA) have agreed to participate. This development marks a landmark moment in U.S. healthcare policy, as it advances the federal government’s efforts to lower prescription drug costs for millions of Medicare beneficiaries.
This agreement follows the Biden administration’s August announcement of the first ten high-cost drugs chosen for negotiation—medications that together accounted for over $50 billion in Medicare Part D spending between June 2022 and May 2023. The negotiation process will extend through 2024, with new, reduced prices slated to take effect in 2026.
Background: Inflation Reduction Act and Drug Price Negotiation
The Inflation Reduction Act of 2022 granted Medicare the authority, for the first time in its history, to negotiate directly with pharmaceutical manufacturers over the prices of certain high-cost prescription drugs. The policy aims to tackle the soaring costs of medications and improve affordability for older Americans.
Key features of the legislation include:
- Selecting top-spending Part D drugs with no generic or biosimilar competition.
- Negotiating prices for drugs used by millions of Medicare enrollees.
- Implementing negotiated prices beginning in 2026.
- Gradually expanding the number of negotiated drugs each year.
The participation of all ten selected manufacturers clears a major hurdle and signals that the process—despite legal and industry challenges—will move forward on schedule.
The Ten Drugs Selected for Initial Negotiation
The initial list includes drugs used to treat diabetes, blood clots, heart failure, cancer, arthritis, and autoimmune diseases. Among the most widely prescribed and expensive drugs selected for negotiation are:
- Eliquis (Bristol Myers Squibb): anticoagulant
- Jardiance (Boehringer Ingelheim and Eli Lilly): diabetes and heart failure
- Xarelto (Johnson & Johnson): anticoagulant
- Enbrel (Amgen): rheumatoid arthritis
- Imbruvica (AbbVie and Johnson & Johnson): leukemia and lymphoma
These medications represent significant spending by Medicare, often costing thousands of dollars annually per patient.
Industry Response and Legal Challenges
While all companies have agreed to participate, several—including Merck, Johnson & Johnson, and Bristol Myers Squibb—have filed lawsuits challenging the legality of the negotiation program, arguing that it violates constitutional protections and constitutes government price-setting.
Nonetheless, HHS Secretary Xavier Becerra emphasized that “the law is clear, and we are moving forward.” He praised the companies’ participation as a victory for transparency and affordability, and reaffirmed the administration’s commitment to defending the program in court.
Implications for Medicare Beneficiaries and U.S. Drug Pricing
This historic step could have far-reaching effects on drug pricing, insurance coverage, and patient out-of-pocket costs:
- Once implemented in 2026, Medicare beneficiaries could see substantial savings on medications included in the negotiation program.
- The program is expected to save the federal government billions in Medicare spending over the next decade.
- It may also influence private market dynamics, as commercial insurers and pharmacy benefit managers (PBMs) follow Medicare’s lead.
However, critics warn that the policy may impact pharmaceutical innovation and R&D investment, though supporters argue that targeting high-cost, mature drugs is unlikely to stifle future breakthroughs.
What’s Next?
With negotiations now underway, the timeline includes:
- 2024: CMS (Centers for Medicare & Medicaid Services) will engage in detailed price discussions with manufacturers.
- September 1, 2024: CMS will publish the final agreed-upon prices.
- January 1, 2026: New Medicare prices for the ten drugs will take effect.
In 2025 and beyond, Medicare will expand the number of drugs subject to negotiation, reinforcing the IRA’s role as a cornerstone of U.S. drug cost reform.
Source:
Sachs Policy Group – Medicare Drug Price Negotiation Update
